Growth and Relational Strategies of Integrators: an Industrial Economic Analysis

Growth and Relational Strategies of Integrators: an Industrial Economic Analysis


E Onghena, University of Antwerp, BE


This paper provides an industrial economic analysis of the expansion and cooperation strategies of integrators. The analysis allows understanding the strategies adopted by the integrators in the past, as well as assessing their future strategies.


Globalisation of the world economy involves that production and consumption are increasingly internationalised. In this ?global village?, transport and logistics services are crucial to reduce cycle times and increase products? speed to market. Logistics service providers with an extensive network allow to keep the transport costs of international trade down, while realising a more efficient use of production factors. This improves productivity, which results in benefits for the consumers.

However, during the past decade, the requirements for transport and logistics services have become stricter and more numerous. The share of high-value and/or time-sensitive goods with short economic life cycle has increased. Therefore, there is a growing need for fast and reliable transport that allows shippers to gain access to global markets and supply chains.

Integrators ? companies that offer vertically integrated, time-definite, door-to-door transport ? are crucial for the delivery of those transport services. Since they are able to control the total supply chain, the strategic and operational importance of integrators for the commercial and production processes of shippers is extremely high. In addition, the competitiveness of a region is partly determined by the presence of one or more integrators.

Currently, only four players are fully integrated across all transport modes, including air transport: UPS, FedEx, DHL and TNT. A market structure in which only a few sellers account for a substantial proportion of total sales, is an oligopoly. The main challenge for the analysis of an oligopoly is strategic interdependence between competitors, which means that each firm?s optimal behaviour depends on its assumptions about its rivals? likely reactions.

Despite the significant market power of integrators, insight into the market structure and the cost structure of these companies, as well as into the consequences of their growth and relational strategies, is lacking. There are no instruments available to examine the market from an industrial economic perspective or to make forecasts.

This paper aims to provide an industrial economic analysis of the integrators? growth and relational strategies. It will be examined why the integrators choose a certain strategy and how the market will possibly evolve in the future.

This paper sets the basis for further research in which four main hypotheses will be tested:
1. Each integrator will finance its growth independently.
2. New players will enter the integrator market.
3. Total costs for vertically integrated companies (integrators) offering an integrated, door-to-door supply chain are lower than the sum of costs for companies offering parts of the supply chain.
4. Integrators will get involved into different types of horizontal and vertical cooperation outside the integrator market.

For testing these hypotheses, the integrators? expansion and cooperation strategies will be analysed from an industrial economic perspective. In order to complete this analysis, industrial economic literature will be reviewed, both theoretical and applied to comparable business sectors. In addition, interviews will be done with industry stakeholders in order to better understand the strategic decisions made by industry participants in the past, as well as to assess the planned strategies and developments for the future. These stakeholders include the Big Four integrators, express carriers, airlines, logistics service providers, representatives from sector organisations, external industry specialists, etc. The interviews will be aimed particularly at determining the factors that influence a change of strategy. Since the strategies of the agents will be mainly driven by variations in their cost functions, the variables of these cost functions have to be determined.

Based on the industrial economic analysis, insight will be gained into the market structure and the future development of the market. Although the integrator market is an oligopoly at first sight, the networks of the agents may overlap so that the aggregate market structure may be different. In a next step, industrial economic tools will be selected and developed in order to understand the growth and relational strategies adopted by the integrators in the past. The selection and development of these tools will depend on the market structure.

The results of this paper will be used subsequently to develop an industrial economic simulation model applicable to the integrator market. This model will allow understanding, explaining and forecasting strategic behaviour of the current market players. Finally, the model will be used to make forecasts about the future market structure and the economic consequences of strategic decisions.

The conclusions of this paper are not only useful for the academic world but also for the industry itself. Moreover, regional and competition authorities should benefit from the results of this research.

Integrators, strategic behaviour, expansion, cooperation, industrial economics


Association for European Transport